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May 24, 2018

Samsung shares extend fall after stock split

PUBLISHED : May 15, 2018 - 16:23

UPDATED : May 15, 2018 - 16:27

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[THE INVESTOR] Shares of Samsung Electronics have been on a downward trend since the firm’s recent scheme to split its stock 50-fold, contrary to previous market expectations that the reduced share price would attract more retail investors and thus be able to boost the stock value.

The stock tumbled for the seventh consecutive day to a low of 49,100 won (US$45.68) per share in intraday trading on May 15.


Related:
FTC chief urges Samsung to restore control tower

Snowballing issues surrounding the tech giant’s governance structure and a market listing of Samsung BioLogics, the drug manufacturing business arm of Samsung Group, are pointed as some factors that have driven down the stock price, but negative outlooks on the firm’s core businesses, including the one for semiconductors, in the second quarter are the main culprit, according to market analysts.

“The second quarter is usually a low season for the semiconductor industry, so the IT companies can hardly drive the stock market this time around,” said Kim Byung-yeon, an analyst from NH Investment & Securities.

Market consensus for the tech behemoth’s operating profit in the April-June period stands at 15.8 trillion won, down by 4.5 percent compared to a previous market estimates in January this year, according to local financial data tracker FnGuide.

Due in part to the lowered market consensus, foreign investors sold around 950,000 shares during the first week after the 50:1 stock split on May 4 -- the basis price of stock was 53,000 won.

Some analysts expected the price will take a turnaround in the latter half thanks to the increasing demand for high-end displays and semiconductors, installed in premium smartphones, such as US tech giant Apple’s next-generation iPhones.

The government’s calls for Samsung to fix its complex ownership structure is also putting downward pressure on the price.

At a meeting with CEOs of Korea’s largest conglomerates last week, Kim Sang-jo, chief of the Korea Fair Trade Commission, denounced Samsung’s current governance structure, which allows the owner family members, including Vice Chairman Lee Jae-yong, to control the entire business group by holding shares in a few Samsung affiliates, such as Samsung C&T and Samsung Life Insurance.

Before he took the top post of the antitrust watchdog, Kim had long suggested the conglomerate set up two holding companies, one for its financial affiliates and the other for non-financial firms, including the tech giant.

More recently, Kim asked Samsung to restore a new control tower that makes core managerial decisions and sets business strategies, such as M&As, for its affiliates, which he argued can get rid of the need of establishing holding entities.

By Kim Young-won (
wone0102@heraldcorp.com)

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